Yuppies May Be Facing Their Own Cash Crunch

In the midst of a record peacetime expansion, the shop-till-you-drop yuppies are feeling the first pangs of an economic pinch that may herald an era of frugality for most other Americans.

Madison Avenue, which invented the term as shorthand for ``young urban professionals,`` defines yuppies as the 3.5 million top-earning baby boomers whose incomes average $51,000 a year. Earning nearly three times the $16,753 average for their generation, they rank in the top 20 percent of U.S. wage earners and are a bellwether of economic trends.

In the 1980s they set the tone for a decade of national overconsumption, while the evidence suggested a decline in middle- and lower-class earning power. Now, there is a pervasive sense that people in high-income jobs, those the Senate Budget Committee defines as paying more than $46,450 a year, are also beginning to feel squeezed.

``There is a good bit of truth to that nagging feeling that living standards, even for upper-income people, are slipping,`` said Sandra Shaber, an analyst with the Futures Group, an economic consulting firm.

The 76 million baby boomers, along with the smaller baby bust generation born in the 1960s, face an economy radically different from the postwar prosperity enjoyed by their parents: a nation $2.7 trillion in debt, owing foreigners nearly $500 billion and borrowing from abroad at a rate of roughly $400 million a day.

As the government ran up its record budget and trade deficits, yuppies fueled the market for upscale imported cars, wines, clothing and consumer electronics, vacationed abroad and relished gourmet foods. Less affluent baby boomers struggled to imitate them, building record levels of consumer and mortgage debt.

But the heyday of easy spending may be over. The sharp decline of the dollar since 1985 has made imports more expensive. Meanwhile, soaring housing costs have put home-ownership out of bounds for many younger people and rising interest rates are beginning to pinch the growing number with adjustable-rate debt.

The fact that even yuppies feel threatened is a barometer suggesting that problems such as high budget and trade deficits, lagging productivity, declining real income and massive foreign debt are beginning to erode the standard of living of most Americans.

``Essential things that our parents and even our older brothers and sisters could buy with a lot less money when they were our age, we can`t afford, even though we`re `rich,``` says Paul S. Hewitt, executive director of the Retirement Policy Institute, a Washington research organization.

Typical baby boomers have not come close to enjoying the rising standard of living their parents experienced at the same age. According to a study by the Urban Institute, a 25-year-old male in 1950 or 1960 could expect his real income to more than double by age 35. But in the 1970s income growth between ages 25 and 35 fell to 16 percent, and in the 1980s was at a virtual standstill.

Expectations today also are different. Older generations toughed out the sacrifices of the Great Depression and World War II, while baby boomers were raised in prosperity.

Keeping up with the Madison Avenue stereotypes, they postponed saving for things such as mortgages, children and retirement, responsibilities that past generations began assuming in their 20s.

But with biological clocks ticking, delaying children ``is not a viable strategy anymore -- it`s now or never,`` says University of Maryland economist Frank Levy, author of Dollars and Dreams: Changing American Income Distribution.

``And once you make that decision to settle down and have kids, it means you probably can`t afford that Celica convertible or the European vacations anymore.``

An increasing number of upper-income families face the paradox of having all the trappings of wealth, purchased on credit with a hefty dual income, then having trouble making ends meet when the pressures of parenthood lead mothers, or in rare cases fathers, to quit work.

``My wife is a psychologist and she found many of the women who were convinced before they had children that they would go back to work, have nannies and day care are beginning to have second thoughts,`` says Michael E. Stone, professor of community planning and social policy at the University of Massachusetts.

``These family type developments could converge with economic difficulties to diminish the ability of people to pay for homes they have bought, let alone those who haven`t bought and may never be able to afford because of stagnant incomes and soaring costs,`` said Stone. He noted that residential mortgage foreclosures topped 1 percent in 1988 for the first time since the Great Depression.

Stagnant income is a major problem for many Americans. According to the Department of Labor, the average weekly wage for non-farm workers, in constant dollars, declined from $190 in 1974 to $168 in 1988.